The graph represents the Keynesian cross for a country, where the planned aggregate spending line (Planned AE) is graphed against a 45° line. Suppose that there is an autonomous decrease in aggregate spending of $40 billion in this country. a. Show this change on the graph-you can drag and shift the whole line or either of the endpoints—and answer the questions. b. What is the initial unplanned inventory investment? If the number is negative, be sure to include a negative sign. 200 180 160 45° line 140 Planned AE 120 100 80 60 60 40 20 billion dollars 0 0 20 40 c. After firms adjust their production, what is the total change in real GDP? If the number is negative, be sure to include a negative sign. billion dollars 60 60 80 100 120 140 160 180 200
The graph represents the Keynesian cross for a country, where the planned aggregate spending line (Planned AE) is graphed against a 45° line. Suppose that there is an autonomous decrease in aggregate spending of $40 billion in this country. a. Show this change on the graph-you can drag and shift the whole line or either of the endpoints—and answer the questions. b. What is the initial unplanned inventory investment? If the number is negative, be sure to include a negative sign. 200 180 160 45° line 140 Planned AE 120 100 80 60 60 40 20 billion dollars 0 0 20 40 c. After firms adjust their production, what is the total change in real GDP? If the number is negative, be sure to include a negative sign. billion dollars 60 60 80 100 120 140 160 180 200
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:The graph represents the Keynesian cross for a country,
where the planned aggregate spending line (Planned AE) is
graphed against a 45° line. Suppose that there is an
autonomous decrease in aggregate spending of $40 billion in
this country.
a. Show this change on the graph-you can drag and shift the
whole line or either of the endpoints—and answer the
questions.
b. What is the initial unplanned inventory investment? If the
number is negative, be sure to include a negative sign.
200
180
160
45° line
140
Planned AE
120
100
80
60
60
40
20
billion dollars
0
0
20 40
c. After firms adjust their production, what is the total change
in real GDP? If the number is negative, be sure to include a
negative sign.
billion dollars
60
60
80
100
120
140
160 180
200
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